The proposed US$ 130 million project covers Almaty Power Consolidated 1997-99 capital investment programme, which is intended to provide financing for urgently needed investments to ensure a reliable supply of electricity and heat over the next few winters, to improve distribution and end-use efficiencies, to reduce technical and commercial losses and personnel restructuring costs.
The objectives of the project are to:
(i) demonstrate the Bank's support for privatisation in the infrastructure sector in Kazakhstan;
(ii) mobilise commercial financing for the first privatised utility in Kazakhstan;
(iii) improve the efficiency of the production and distribution capacities of APC and reduce losses;
(iv) improve the billing and collection of revenues;
(v) improve the environmental performance of the company
The proposed investment in the first ever privatised utility in Central Asia will have a strong transition impact not only in Kazakhstan but in the entire region. It will demonstrate that the privatisation of the utility sector to experienced operators and investors can lead to the inflow of investment.
Almaty Power Consolidated (APC) is a fully private utility, incorporated under the laws of Kazakhstan, which is in charge of the generation, transportation and distribution of heat and power in the municipality of Almaty. APC's share capital is entirely controlled by Powerfin Holding Invest BV, which is wholly owned by the Belgian industrial public company Tractebel S.A. Powerfin will support the project by providing equity and subordinated debt. Tractebel will provide implementation support to APC.
The financing of the project includes three different kinds of facilities:
- US$ 25 million (ECU 21.55 million) A loan with a maturity of 11 years and six months, including a grace period of two years, at a rate equivalent to six-month LIBOR plus a margin;
- US$ 12.5 million (ECU 10.78 million) B loan with a maturity of 11 years, including a grace period of two years at market rate;
- US$ 7.5 million (ECU 6.46 million) subordinated convertible loan with a 10-year maturity and repayment of principal in two equal semi-annual instalments starting 15 July 2007. Interest rate is at a margin over LIBOR, plus an interest premium in accordance with the dividend distribution policy of the company.
Additional financing to cover project costs will be provided by the International Finance Corporation (IFC) and the company.
US$ 130 million (ECU 119.05 million).
The project was screened as B/1, requiring an environmental analysis and environmental audit.
The project addresses APC's urgent investment needs for 1997-99 and would help the company to improve the efficiency of its production and distribution capacities and reduce system losses. The project does not constitute a major rehabilitation of APC's facilities and would not result in a substantial extension of the expected operating life (ten years or more) of the facilities. The project includes capital repairs of the existing facilities to allow their continued operation for a number of years before APC would start implementing longer-term investment plans.
Almaty's heat and power generation facilities are currently inefficient and in a state of disrepair. APC operate three thermal heat and power plants within or close to the city of Almaty, plus two hydro facilities further afield. TETS-1, located in the city centre, uses natural gas whenever possible to reduce dust emissions. The two other thermal plants use low-quality, high ash coal, resulting in substantial dust emissions and the need for large-scale ash disposal facilities. Sulphur content of the coal is relatively low. The heat and power distribution systems are also in need of repair (e.g. insulation of heating pipes) and lack monitoring and control facilities. The proposed project includes energy efficiency measures, such as installation of control valves, initially on a trial basis.
Environmental investigations have been carried out by an independent consultant in accordance with terms of reference defined by the International Finance Corporation (IFC) and the EBRD. APC have prepared a draft Environmental Action Plan (EAP), which has been reviewed by the independent consultants, the IFC and the EBRD. The EAP outlines the steps that APC would take to improve the environmental performance of its facilities and operations, and to achieve, within a reasonable period, compliance with relevant World Bank environmental policies and guidelines as well as Kazakhstan environmental requirements. As part of the EAP, APC would set up an Environmental Management System generally following the principles of ISO 14001. The final EAP, which will be agreed with the IFC and the EBRD, will cover environmental management issues, operational aspects (improvement of environmental control procedures) and investments in technical improvements, including monitoring equipment.
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